How to Value a Business in a Tennessee Divorce

If you’re considering a divorce, you’re probably familiar with the concept of dividing marital assets – a process that sounds simple enough but usually isn’t. And that’s never more true than when a business or private practice needs to be valued for equitable distribution. Divorce can be messy and complicated, but the skilled team at Mandy Hancock Law can help ensure you don’t get the short end of the stick.

What is Property Division?

Property division, or division of marital assets, is essentially the splitting of property and assets you and your spouse acquired during your marriage. Unfortunately, divorce and asset division are rarely simple and almost always require the intervention of the courts. 

There are several things to consider regarding businesses in divorce. Was the business started or owned before the marriage? Were the assets kept separate from marital assets throughout the entire marriage? If yes to both, the business is likely a non-marital asset. However, if the business was started during the marriage or if any assets were commingled, the business will be categorized as a marital asset.

Business Ownership Can Be Tricky

When large assets must be valued and split, it only adds to the worry and stress of a divorce. Our team of family attorneys understands how trying this season is, and we’ll do everything we can to ease your burden. If your divorce involves business valuation, a knowledgeable Tennessee divorce lawyer can help ensure everything goes smoothly. 

Business ownership and division isn’t always as black-and-white as it might seem. For example, say you owned a business before you got married. This might seem like a clear case of a non-marital asset. However, increased value during the marriage could count as marital property, especially if your spouse contributed to the business.

Asset Approach

If your company is relatively small and its operations are fairly uncomplicated, the asset approach is ideal. That’s because it’s the most straightforward method for valuing your business. With this approach, liabilities are subtracted from assets to determine value. This method does not take unrecorded liabilities or unrecorded assets into account, which is why it’s best for small businesses.

Market Approach

With the market approach, comparable sales are examined to help determine the value of your company. Like valuing a home, this method is only effective if there were businesses in the same industry, of the same size, in your same area, that were recently sold.

Income Approach

The final option for the valuation of your business in Tennessee is the income approach. Here, the total value of your business is calculated through formulas that factor in your historical cash flow and future expected cash flows. Other factors include risks to your business, the rate of return, and any future benefits that could impact the value of your business.

Though the income approach is the most involved and thorough, it is also the most popular valuation method in Tennessee. An experienced divorce attorney can help you understand which business valuation method is right for you, ensuring the best possible outcome.

What is Double Dipping in Business Valuation?

In divorce proceedings, double dipping refers to counting a marital asset twice. For example, a marital asset could be counted once in the process of property division and again during the spousal support calculations. Because the same income was counted twice, the business-owning spouse finds themselves at a huge disadvantage when double dipping occurs.

When dividing marital assets, having a dedicated divorce attorney at your side is essential. Your attorney will carefully examine the business valuation methodology to ensure everything is equitable and fair. 

How Can a Tennessee Divorce Lawyer Help?

A family lawyer can be just the voice of reason and expertise you need to gracefully navigate your divorce. Your attorney will help guide you through every stage of your separation, including asset division and business valuation, no matter how complex.

Our property division lawyers can help with the following:

  • Help settle disputes about the property in question
  • Work with prenuptial agreements
  • Help you reach a fair agreement
  • Mediate between you and your partner
  • Possibly help avoid escalating the matter to court
  • Offer expert advice and guidance every step of the way
  • Represent you in court if necessary

Contact An Experienced Tennessee Divorce Lawyer Today

Divorce is a sensitive matter that can be incredibly trying. Luckily, a Tennessee divorce attorney can help you feel empowered, equipped, and prepared while protecting your interests and reaching a fair resolution.

Our family law attorneys can help with the following:

Contact Mandy Hancock Law today if you are considering divorce. Our family lawyers will work toward fair and favorable outcomes no matter how complex your case. Whether you need help with custody, alimony, spousal support, or mediation, our team of experts is here to advocate for you every step of the way.